Earlier this morning, economist Brian Wesbury was on Bloomberg Surveillance with Tom Keene. He spent the better part of the interview talking trash about about Paul Krugman’s economics.
“If government spending actually created wealth – if it was true, if Paul Krugman was right – then there shouldn’t be one person in poverty anywhere in the world,” said Wesbury. “Every economy should be growing at 4% with 4% unemployment. But it’s not true.”
One of my laws of political discourse — and, it turns out, of economic discourse, which turns out to be much the same thing — is that nobody ever admits having been wrong about anything. A closely related point is that completely dumb fallacies not only don’t go away, they remain in full force no matter how dumb they are.
The fallacy Krugman is referring to is Wesbury’s comments. He goes on:
You might think that by now people would have gotten the conditional nature of the claim: fiscal expansion has a positive effect if the economy is depressed and monetary policy won’t move to offset it — typically, if the economy is in a liquidity trap. It’s not as if the advocates of fiscal stimulus haven’t made this point again and again, all the way back to Keynes’s dictum that the boom, not the slump, is the time for austerity. But noooo.
Krugman rounded off his brief post with this sarcastic low blow to Wesbury.
…the man has what you might call an impressive forecasting record.
That link goes to to a post on Barry Ritholtz’s blog that chronicles the most epic bad calls pre-crisis.
Brian Wesbury, July 26, 2007
“The current financial environment does not reflect conditions normally associated with a credit crunch. The bottom line is that fears about the underlying health of the economy and financial markets are more about hypochondria than reality.”